Question

Indigo Books & Music Inc. is Canada’s largest book, gift, and specialty toy retailer. The company operates more than 200 stores under the Coles, Indigo, Indigospirit, SmithBooks, and The Book Company banners. The company also has a 50% interest in the Calendar Club of Canada Limited Partnership, which operates mall-based stores and seasonal kiosks. The financial information in Exhibit 7-23 is from the company’s 2014 annual report.

Required:
a. Calculate Indigo’s inventory turnover ratio and the days to sell inventory ratio for 2014 and 2013. Comment on the results.
b. Given the result of your analysis in part (a), would you expect Indigo to have significant payables to the publishing and distribution companies it purchases its inventory from? Was this the case?
c. Explain Indigo’s inventory valuation polices in your own words. Specifically, explain what Indigo includes in inventory cost, what cost formula(s) the company uses, and how it values its inventory on the statement of financial position.